The BSE Sensex rose 1.5 percent on Wednesday, led by gains in Tata Motors after it reported a better-than-expected quarterly profit, with signs of easing inflation sending stocks of automakers and banks higher.

Tata Motors rallied as much as 6.7 percent to 286.95 rupees, a record high, a day after it said net profit rose 40.5 percent as sales at Jaguar Land Rover more than offset weakness in its home market.

At 10:50 a.m. (0520 GMT), the main 30-share BSE stock index was up 1.5 percent at 18,112.7 with 27 of its components in the green.

The main index has risen more than 15 percent this year, with foreign institutional investors buying about $4.2 billion of Indian equities.

Vehicle makers and banks rallied, a day after data showed headline inflation slowed to its lowest level in more than two years in January.

There are clear suggestions that inflation is softening and its downturn has started, while the interest rate circle is at its peak, said Hitash Dang, vice president at Jaypee Capital.

Everybody is thinking that the worst is over the for the rate-sensitive sectors, Dang said. And it's not a euphoria but there is a realisation that the cost of financials will go down.

Top automaker Maruti Suzuki rose 4 percent and Mahindra & Mahindra rose 3.2 percent.

ICICI Bank rose 2.3 percent, top lender State Bank of India rose 1.6 percent, while HDFC Bank was up 0.8 percent.

Engineering conglomerate Larsen and Toubro and construction company Jaiprakash Associates rose more than 3 percent each.

The MSCI's measure of Asian markets other than Japan was up 1.4 percent, while Japan's Nikkei was 2.6 percent higher.

The 50-share NSE index was up 1.45 percent at 5,494.5. There were 3.7 gainers for every loser in the broader market on a total volume of 271.2 million shares.

STOCKS ON THE MOVE

* Educomp Solutions fell 4.25 percent after its quarterly profit slumped 75 percent.

* Paints maker Akzo Nobel India rose 1.2 percent after is said its board would consider a buyback of shares from minority shareholders.

* Offshore services firm Great Offshore soared 11.4 percent after it posted a four-fold jump in December quarter net profit.

* Max India rose 4.4 percent after the Economic Times reported that New York Life Insurance Co was in talks to sell its stake in its life insurance joint venture with Max India. A spokesman for Max India could not be immediately reached for comment by Reuters.

TOP THREE BY VOLUME

* Lanco Infratech on 37.2 million shares

* Tata Motors on 17.06 million shares

* Unitech with 14.99 million shares